Will Indian Billionaires Sign-up for the Gates-Buffett Pledge?

11 08 2010

 Bill Gates and Warren Buffett are not only the two richest guys in the planet, they are also the most generous. Apart from donating their own wealth, now they have started a campaign to enlist billionaires to pledge more than half of their wealth for philanthropy. In US, already they have received a good response with 40 signers which includes big names like Michael Bloomberg, Pierre Omidyar, David Rockefeller, Sandy Weill, John Doerr etc reports Wall Street Journal.

Bill Gates and Warren Buffet, now intend to take this campaign global. They are slated to visit China in September and India in March 2011. India is home to 52 billionaires as per the latest Forbes list of March’10. It has two names in the Top Ten viz.  Mukesh Ambani and Lakshmi Mittal. Hence their trip to India is a logical idea.

The question to ask is will any of the Indian billionaires sign up this pledge. One WSJ blogger Devin Banerjee has already asked this question and has asked the billionaires themselves. According to this post :

Spokespersons for the wealthy Indians contacted by India Real Time, who included Mukesh and Anil Ambani, Azim Premji and Sunil Mittal, danced around the issue or declined to comment. Requests for comment from seven Indian billionaires weren’t returned, and a spokeswoman for Dilip Shanghvi, chairman of Sun Pharmaceuticals, whose net worth is estimated at $4.6 billion, said Mr. Shanghvi “would prefer not to talk on personal philanthropy.”

The same post quotes Emily Harrison, founder of Innovaid, a Mumbai based consultancy for advising high net worth individuals on charity, “I don’t think they’re ever going to pledge half, even though I would love to see that.”

I will also be totally surprised if any billionaire signs up for the Gates-Buffett pledge. 

Indians and Indian rich in particular, give away a very small fraction of their earnings to charity. According to a Bain study, quoted by the above mentioned post, only 10 % of charity in India comes from individuals and companies in contrast to 75 % in the US. In India, the biggest donor is the government.

As to why they do not give in charity. Here is my take :

  • At this stage in India’s growth, the billionaires are still accumulating wealth. The market economy has really come into its own only in the last two decades. So, the billionaires are spending money on themselves through conspicuous consumption through swanky bungalows, personal planes, fancy weddings etc. This is almost in revolt to the years of repression due to MRTP or penal income tax and other socialistic policies.  
  • Even among the billionaires who do not wish to flaunt their wealth ( for e.g. Azim Premji), bequeathing their wealth (shares in their companies) to their children is top on their agenda. The inheritors of the rich not only inherit the wealth, they also get control and management positions by virtue of the shares they get from their parents. Business families may allow the companies to go to seed by having worthless inheritors ( e.g., the Dalmias ) but they would not give their wealth away for charity. If there was an inheritance tax in India, perhaps Indian rich may not accumulate so much wealth for their children. 
  • Most Indians and Indian rich are Hindus, by faith. Unlike Islam, Christianity, Judaism which prescribes a portion of the income to be given away to charity, Hinduism does not give any norm. Whereas charity and generosity are seen as a virtue in Hindusm, it leaves it to the individual. Thus the rich are under no moral or religious compulsion by way of their faith to give away to charity. Some Indian business houses like the Birlas donate money to build temples and places of worship.  
  • Corporate Social Responsibility is still seen largely as a public relations exercise or a business requirement. As Indian billionaires, many of whom make their wealth through ‘privatization by stealth’ (as remarked by Raghuram Rajan), they do some community work around the factories they build. This is more out of a business compulsion rather than genuine philanthropy. 
  • In the pre-independence days, the rich were also involved in the freedom struggle. They contributed their wealth to the freedom movement. Sir Ratan Tata had funded Gandhiji’s struggle in South Africa  by contributing Rs125,000 ( a princely amount, those days ) in 1909. G D Birla, Jamnalal Bajaj all were big contributors. Now, the Indian rich are islands unto themselves. To be fair to them, the political leadership is hardly inspiring enough. Many of the political masters in India are themselves billionaires, except that their names do not appear in any Forbes list.

If the Gates-Buffett pledge campaign   makes philanthropy a status symbol among the rich, you could well have a few rich loosen their purse strings a wee bit. 

– G. Mohan




2 responses

11 09 2010

Salman Khurshid, the Union Minister of Corporate Affairs, on the day Id is being celebrated , has announced a “Zakat” policy for the Indian corporates. ( Zakat is the mandatory charity which every Muslim has to make at the end of Ramzan).

As per the proposed amendment to the Companies Act, companies have to mandatorily spend 2% of their net profits on CSR activities. Economic Times reports :

“Every year at least 2% of its (companies’) average net profits during the three immediately preceding financial years shall be spent on CSR activities,” the ministry said in an statement.

The new provisions may apply to companies having a net worth over Rs 500 crore, or a turnover over Rs 1,000 crore, or a net profit of over Rs 5 crore in a year. While the idea to mandate a minimum spending on CSR front is still being debated, what appears certain is that companies will have to make specific disclosures of their social spends in their annual report.

The ministry’s statement comes after the Standing Committee on Finance, chaired by BJP leader Yashwant Sinha, presented its report on the new Companies Bill in the Lok Sabha. The revised Bill is expected to be presented in Parliament for passage in its Winter session.

India’s largest company Reliance Industries which made a PAT of Rs 16,235 cr in 09-10 will have to spend Rs 320 crore mandatorily on CSR. Compare this with their dividend distribution of Rs 2084 crores and personnel expenses of Rs 2330 crore.

Mukand Industries, with a net worth of Rs 500 crore ( approx) , would probably be the last in this illustrious list. Mukand had a PAT of Rs 62 crore in 09-10 will have to spend Rs 1.2 crore mandatorily on CSR. Their dividend distribution was Rs 7.31 crore and their personnel expenses was Rs 96.25 crore.

If society is also a stakeholder , albeit a minor one, like shareholders and employees , the 2 % provision looks lesser than it ought to be. The companies must go beyond the mandatory 2 % . Also they should be honest with their reporting.

The move is laudable and congrats to Salman Khurshid for this proposal. Idd Mubarak !

– G.Mohan

15 10 2010
Shiv Basu

There seems to be some move in these lines. But whereas India receives a considerable portion of Bill Gates’ charity, Ratan Tata’s charities seem to be directed towards the US. Can’t really say, if it’s a charity or a business move. I am referring to this article (Tata Donates $50 Million to Harvard ) in WSJ: http://online.wsj.com/article/SB10001424052748703631704575552453185625126.html?mod=WSJ_hpp_MIDDLETopStories#articleTabs%3Darticle

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